Relations
between the EU and Ukraine are at an impasse.
The
last two years have been dominated by rows over the selective prosecution of
regime opponents, in particular the conviction of former Prime Minister Yuliya
Tymoshenko in October 2011, and an accelerating trend towards a more authoritarian
and corrupt style of rule in Ukraine.
Attention
has now turned to the parliamentary elections held on Oct. 28 as a different
test of Ukraine’s democratic bona fides. The opposition rightly feels aggrieved
that the authorities have denied them a possible victory. There was some direct
fraud, particularly in the new territorial constituencies.
But
in general the authorities sought to rig the election by other methods such as
the covert use of “political technology” and a change in the voting system that
the opposition ironically agreed to back in 2011. (The Ukrainian parliament has
450 members of parliament. After the 2004 Orange Revolution, it was thought
better that all of them should be elected by proportional representation. But
in 2011 the government forced through a return to the earlier system, under
which half of members of parliament would be elected by party lists, and the
other half in territorial constituencies, where so-called administrative
resources — that is, state-directed
fraud — had more weight. Paradoxically,
this meant that in many ways the election was more competitive than expected –
but only because the authorities were confident they would win.
The
recent focus on the elections has broadened the European view from the
Tymoshenko case to look at how things have deteriorated across the board. But
there is also a danger that the EU will move the goalposts and make the conduct
of the elections the only criterion for deciding whether or not it should
restart relations with Ukraine, or judge the authorities more on past than on
present behavior and use a critique of the elections to move towards a de facto
isolation policy.
In
November, the Foreign Affairs Council will decide whether to move forward with
the association agreement and deep and comprehensive free trade agreement with
Ukraine that have been on hold since last December.
The
annual EU-Ukraine summit is still scheduled for some time before the end of
this year, though neither side is particularly enthusiastic. Some in the EU are
minded to sign the agreements, in part because the process of ratification by
member states is likely to get bogged down anyway. Others want to use the
agreements to enforce red lines on political prosecutions or democratic
deterioration.
However,
neither approach will help transform Ukraine into the kind of society the EU
would like to see. Signing the agreements prematurely would undermine conditionality;
leaving them on ice leaves the EU without leverage. The EU therefore needs to
think of creative ways of regaining influence while maintaining red lines on
values – not least because the political situation in Ukraine could easily deteriorate
further.
A
tightening of the screws on independent media and on the still strong
independent NGO sector is possible after the elections. The row over the
Tymoshenko case was bad enough. But unless the EU regains traction, there will
be worse to come. The authorities are entrenching
themselves
in power by every possible means, and members of the literal and metaphorical
“family” around President Viktor Yanukovych are using that power to enrich
themselves on an unprecedented
scale. The EU cannot afford to wait until the next contest in 2015.
Return of ‘political technology’
There
were some encouraging signs of democratic vitality in the October elections.
The mass media opened up a little, if only temporarily. The authorities were
unable to prevail in several key hotly contested constituency races.
The
United Opposition coalition built around Tymoshenko’s Fatherland party came
second, even though she was not allowed to stand. But while the EU has tended
to focus on election fraud and the selective prosecution of political
opponents, democracy in Ukraine is now being undermined in many other ways.
The
judicial “reform” pushed through in 2010 now gives the state the power to put
anyone it wants in prison. The legal system has become totally politicized; conviction
rates are
over
99 percent. The judiciary is used to silence enemies and to legitimize the
increasing problem of raidership, or the theft by oligarchs of each others’
businesses.
Even
the release of Tymoshenko would not solve this more fundamental problem.
Where
the opposition did well, it was despite its own weaknesses. Many of its leading
figures played safe and stood on party lists rather than take on the ruling
Party of Regions directly in the constituencies. The three main opposition parties
– Fatherland, UDAR (known as “Punch” because it is led by the boxer Vitali Klitschko)
and the far-right Freedom Party – could only reach a partial agreement on
withdrawing in each others’ favor in the constituencies.
Each
suspects the other of acting as a trojan horse and secretly planning to ally
with the Party of Regions after the elections. Divisions within the main
parties are manifold, and where they do not exist they are created by the
authorities’ malign influence.
The
opposition shouldn’t even be the opposition in the outgoing parliament, as it
won the last elections in 2007. But disunity in its ranks has repeatedly led to
defections and failure to block or effectively resist key measures like the
election law itself in November 2011 or the new law on languages in July 2012.
The
position of the opposition is being further weakened by the revival of
so-called “political technology” (the local black arts of covert manipulation).
Many of the “opposition” parties running in the election were in reality covert
projects of the authorities. Forward Ukraine! and its leader Nataliya Korolevska
act like radical opposition forces, but are in reality what is known locally as
“clones” – that is, copies of other parties financed by leading oligarchs that
try to take the place of the old opposition – hence the choice of a young,
glamorous female leader to compete with Tymoshenko.
The
authorities prevented some opposition parties such as UDAR from campaigning in
eastern Ukraine, where the Party of Regions is relatively sanguine about losing
votes to other parties such as the Communists, as it knows the Communists will
be a reliable part of any future super-majority.
Even
the genuine opposition parties are now all financially dependent on oligarchic
sponsors, often even from the authorities’ own ranks. Ukraine’s richest man,
Rinat Akhmetov, supposedly spent $80 million on Forward Ukraine! – though he
allegedly cut funding because the project
was threatening to take votes off the Party of Regions.
The
Communists are sponsored to the tune of $25 million by Ihor Koletnik, the head
of the Customs Service. This financing illustrates how threatened some
Ukrainian oligarchs feel by the rise of Yanukovch’s “family.” At the same time,
however, such funding reduces the real independence of the “opposition.”
The
opposition parties have also been seeded with so-called tushki (tushka means
the corpse of a small animal – something like “road kill”) – individuals who
are known to be easily bribeable and are pre-programmed to defect after the
election.
The
problem of bribery and the defection of MPs has been around for a long time. In
2004, changes to the constitution were agreed that required MPs to stay in the
parties they were elected to serve and to ensure that the government “majority”
was made up of parties rather than individuals.
But
in a blatantly partial ruling in 2010, the Constitutional Court reversed that
decision. At least 80 percent of “independent” MPs will be persuaded to join
the authorities’ camp by the same means. Thus even though the Party of Regions
did not win the headline vote, together with the fake opposition,
“independents” and tushki, it still has a majority and is within reach of the
300 out of 450 seats in the new parliament it needs to change the constitution.
The
three main opposition parties will have to show an uncharacteristic level of
solidarity to prevent this happening.
Rise of the ‘family’
Corruption
has also increased substantially since the 2010 elections. Yanukovych has
increasingly vested power and wealth in a literal and metaphorical “family.”
The
president’s oldest son Oleksandr Yanukovych and his associates have taken over
the central bank and tax, finance and law enforcement agencies, and used that
power to take over rival businesses.
This
began with businesses owned by supporters of the losing side in 2010 and
Ukraine’s vulnerable small-and-medium enterprise sector. Now the “family” has
shifted to targeting major oligarchs. “Grabbing property started with the
supporters of the orange elite, but now it is danger of spreading to the
relatively loyal guys,” says leading Ukrainian analyst Mykhailo Honchar.
Over
the last year, the “family” has begun moving into the coal business,
electricity, telecommunications and agriculture.
Land
privatisation is scheduled finally to move forward after the elections, but
amendments to the law recently created a new state land bank that would have
first right of purchase if peasant farmers chose to sell their land, leading to
fears that “family” businesses will quickly accumulate the largest parcels of
Ukraine’s rich farm land.
Ukraine’s
co-hosting of the Euro 2012 football championship finals was marred by
controversies over the privileged role of shadowy contractor companies linked
to the “family” like Altcom.
Rake-offs
and over-payments cost the Ukrainian taxpayer hundreds of millions of dollars.
In August 2012, Yanukovych signed a law cancelling the obligation of state companies
to hold tenders for the purchase of goods and services when they use their own
funds.
Yuliya
Mostova, the editor of Ukraine’s main independent paper Mirror of the Week,
argues that Yanukovych’s goal is simple.
“He
wants to be the richest man in Eastern Europe”, she says. “Yanukovych is the
first president of Ukraine who needs a controlling share not only of all power
in the country but of all
its business too.”
The
power of the “family” is likely to grow further after the elections as Serhiy
Arbuzov, the current head of the central bank and “curator” of the many
“family” businesses, moves to become
first deputy prime minister or even prime minister.
Because
the interests of the “family” are currently all within Ukraine, its members are
immune to the argument that Ukraine needs the agreements with the EU.
However,
other oligarchs who trade or invest abroad are deeply worried about the threat
to their business interests.
Fragile pluralism
The
authorities are not far short of a two-thirds majority in the new parliament
that would allow them to change the constitution.
For
example, they could decide to allow Yanukovych to be “re-elected” by parliament
in 2015 rather than directly by the people. Alternatively, as the authorities now
control almost all political branches of state, they could target remaining
independent centers of power before any such challenges arise.
Since
2010, the authorities have been gradually tightening control over independent
media,
not
by restoring direct censorship, but by challenging and redistributing
oligarchic control. As Serhiy Kudelya puts it, “control over the leading
television channels by oligarchic moguls close to Yanukovych has produced a more
decentralized system of self-censorship.”
The
new preference is for so-called usnyky, or verbal instructions, from the
presidential administration to TV owners in person. Thus the media remains
pluralistic but is highly corrupt. According to one UDAR adviser, “all media is
now paid for, and we have to play that game.”
The
authorities may drop their relatively hands-off approach to the media once the
vote is over, just as they did once the Euro 2012 final in Kyiv was out of the
way, in part so that the
“family” can muscle in on the local media market.
The
campaign that began in the summer against Ukraine’s last remaining TV channels
like TVi and independent outlets like the paper and popular web site Left Bank,
as well as sites modeled on Alexey Navalny’s campaigns in Russia like parklikeidiot.com.ua
and nashigroshi.org (“Our Money”), which looks at corruption in public
contracts, may well be resumed.
Meanwhile
Ukraine’s relatively free NGO sector looks like an increasing anomaly. The
number of registered NGOs has actually grown in recent years. Ukraine has not yet
followed Russia by forcing out “foreign” NGOs and substituting them with
Kremlin-friendly “government organized NGOs”
or GONGOs (Russia’s own measures were ironically a reaction to Ukraine’s Orange
Revolution in 2004).
But
the Ukrainian authorities are now setting up “clone” NGOs such as For Fair
Elections, which predictably gave the October elections a clean bill of health.
Ironically
and sadly for the country that staged famous mass protests against the last
rigged elections in 2004, the organization of crowds and demonstrations is now
a professional business – demonstrators, often students, are paid to turn up.
Precisely
because many NGOs played a key role in election monitoring, a “final front”
against them could be opened after the elections.
On
the other hand, the opposition has a strong defensive position in the new
parliament and there are signs of dissatisfaction and division within the
ruling elite. The EU should support political and economic pluralism wherever it
can.
The customs union bluff
Even
before the association agreement and deep and comprehensive free trade agreement
were frozen in December 2011, the EU was not good at explaining the benefit of
them to Ukrainians.
Since
the agreements were frozen, the Ukrainian media has been increasingly stressing
their downside – which is not insignificant, given the cost of implementing such
a large proportion of the acquis communautaire. This argument has
particular traction with hard-pressed small-and-medium enterprises, which are
suffering as the Ukrainian economy seems to be
going
into another recession. Ukraine’s SME sector was already too small for an
economy of its size, but has actually shrunk in recent years to less than 20
percent of gross domestic product.
Banks
have virtually stopped lending to SMEs, particularly because they have been
renationalized since 2008 – the share of banking assets owned by Western banks
has fallen from
a peak of 42 percent in early 2009 to 25 percent in the first
half of 2012. The new owners favor
lending to big oligarchs – which often means themselves.
The
Ukrainian authorities intend to use the elections to restore their legitimacy
in the West. If it is not forthcoming, they will blackmail the West by
threatening to join the Russia-led customs union. But this is a bluff. In fact,
only a handful of oligarchs, mainly the so-called gas lobby, would see gains in
such a union. Ironically, it is the hard-pressed SME sector, rather than the
oligarchs, that may be tempted by the idea of a customs union with Russia.
Even
more ironically, the “family” would not gain at all if Ukraine were more open
to Russian capital.
Policy recommendations
The
current impasse means that doing nothing will simply allow these worrisome
trends to get worse. The mooted solution of signing the agreements if the
elections are deemed “not too bad” is just as dangerous.
It
would completely undermine conditionality, which was originally applied over selective
prosecutions, and deepen the regime’s current sense of impunity. Creative
thinking is therefore needed in order to get round the impasse and move
relations onto another page. The Tymoshenko case is only one of many problems. Her
release should be an ultimate goal but not the
only immediate goal.
The
first step is to better define conditionality in the three key areas of
selective prosecutions, the conduct of elections and “reform.
There
are too many EU voices in all three areas, particularly on the Tymoshenko case:
some EU leaders have asked for her release; others have complained at new charges
being laid against her; and others have criticized the conditions in which she
is held.
The
EU therefore needs to agree a standard that is both substantive and actionable:
asking the Ukrainian authorities to comply fully with any ruling of the
European Court on Human Rights is one possibility.
On
elections, the final Organization for Security and Cooperation in Europe-Office
of Democratic Institutions and Human Rights report should be as rounded as
possible, looking at “political technology” as well as simple fraud, but also
noting areas in which the authorities’ will or schemes did not prevail.
The
EU should press for “reform” in areas that enable progress on other fronts,
such as dropping the provisions in the antidiscrimination legislation that are
incompatible with visa liberalization.
The
second step should be provisional application of the agreements with the EU. If
necessary, the association agreemetn could be split to allow the deep and
comprehensive trade agreement and sectoral parts to be enacted on their own
without the “political” and justice sections.
Alternatively,
the agreements could remain in deep freeze, but the EU could continue with
sectoral integration on the basis of parallel sectoral agreements. Defining a
dividing line between what is EU competence (most of the deep and comprehensive
free trade area) and
what is member-state competence will be difficult but not impossible.
There
was always a strong case both for the agreements, which will help transform
Ukrainian society in the long run, and for red lines. But it makes little sense
to block the agreements to punish Ukraine. Rather, the EU should take a tougher
line in other areas in order to allow the agreements to be revived.
Creation of Ukrainian ‘Magnitsky list’
The
advocates of a tougher approach will hopefully feel happier about the
agreements going forward if they can see that action is being taken elsewhere.
The
resolution on Ukraine passed by the U.S. Senate in September is the beginning
of a trend towards the construction of a Ukrainian equivalent of the Sergei Magnitsky
List. (Magnitsky was a lawyer who died in prison in 2009 after being mistreated
by officials. He had exposed high-level corruption in Ukraine. The U.S.
Congress is considering sanctions against Russian officials responsible for
Magnitsky’s imprisonment and death). The
European Commission is investigating Gazprom.
The
EU should start with a visa ban on Renat Kuzmin, the deputy prosecutor
responsible for the trials of Tymoshenko and former Interior Minister Yuriy
Lutsenko. The EU should also audit the activities of suspect “family” companies
in Austria, Cyprus and Luxembourg (and in Liechtenstein and Switzerland), which
break existing EU law.
This
need not be formal “sanctions”; it can be undertaken by national financial
security agencies. The US is currently taking a tougher line, but most of the
Ukrainian elite’s financial malfeasance is within the EU and dependencies like
the British Virgin Islands.
For
example, the Activ Solar company, which is based in Vienna, allegedly acts as a
front for
government circles that are siphoning off budget money and circulating it back
home tax free.
In
this sense, the lack of Western interest would be fatal for Ukraine.
The
third step should be to press ahead with parallel measures. The authorities’
propaganda relies heavily on the argument that the EU cares only about
Tymoshenko and not
about ordinary Ukrainians.
Visa
liberalization should therefore be a part of any scenario. Ratification by the European
Parliament of the new amended visa facilitation agreement signed in July has
also been blocked because of the Tymoshenko affair, but should now move
forward.
Now
that Ukraine has introduced biometric passports it should be within sight of
the second, post-legislative stage of its visa liberalisation Action Plan.
Wider travel will liberalise Ukraine in the long run. So would easier internal
travel, if budget airlines could be attracted to Ukraine as a result of an Open
Skies Agreement.
Changes
to the Erasmus education exchange program will also benefit Ukraine, but the EU
needs to be wary of encouraging a “brain drain” from Ukraine and should instead encourage
a two-way process with schemes to encourage visiting students and experts from
the West.
The
EU should also be much more proactive about advertising the economic and social
benefits of the agreements. It should develop a positive communication
strategy, involving local NGOs, to sell the agreements to local stakeholders.
The
EU should also support the emergence of new independent actors in Ukraine.
Western loans and investments, for example, help protect business against raidership. The
EU should help revive lending schemes for small-and-medium enterprises, which
are not working as they might – from the European Bank for Reconstruction and
Development and the
World Bank.
Finally,
the EU should open other channels to circumvent the current dialogue of the
deaf. The European Parliament’s Aleksander Kwasniewski/Pat Cox mission to
monitor selective prosecutions, which is currently suspended for the duration
of the elections, can be replicated and expanded.
The
EU should give a voice to business circles that are worried by the rise of the
“family.”
Conclusion
Ukraine’s
leaders behave like they have immunity and impunity, as if Ukraine were a vital
raw material supplier or possessed of other geopolitical importance. In
reality, they only have power in isolation. The EU should not fear continuing
to apply tough standards to Ukraine. But the EU needs leverage and should also
work harder to show it is on the side of Ukraine’s beleaguered democratic,
liberal and economically constructive forces.
Once
Ukraine develops proper relations with Europe appropriate to its size, location
and economic potential, the EU’s leverage will be much higher. It’s time to
show Ukraine some tough love.
Andrew Wilson is a senior policy fellow at the European Council on Foreign Relations
and a reader in Ukrainian Studies at the School of
Slavonic and East European Studies at University College London. He has
previously held academic positions at the London School of Economics and
Cambridge. His most recent books are Belarus: The Last European Dictatorship
(2011) and The Ukrainians: Unexpected Nations (third edition, 2009). His publications for the European Council on Foreign Relations include Ukraine after the
Tymoshenko verdict (2011) and Turning Presence into Power: Lessons
from the Eastern Neighbourhood (with Nicu Popescu).
